Letter to William Kovacic, Chairman of the Federal Trade Commission, Re: Investigation into Skyrocketing Fuel Prices

Letter

Letter to William Kovacic, Chairman of the Federal Trade Commission, Re: Investigation into Skyrocketing Fuel Prices

Durbin Requests Investigation into Skyrocketing Fuel Prices

United States Senator Dick Durbin (D-IL) today sent a letter to the Chairman of the Federal Trade Commission (FTC), asking for an investigation into the recent spike in diesel and jet fuel prices. Nationally, diesel prices are at an all time high while airlines are faced with a growing gap between the cost of crude oil and the price they pay for retail gasoline.

"The spike in fuel costs - especially diesel costs - is alarming. I have asked the Federal Trade Commission to investigate the situation to make sure no one is being taken advantage of," Durbin said. "While oil companies are earning record breaking profits the price of fuel is breaking the backs of American workers, businesses, communities and families."

The high cost of diesel is hurting transportation agencies nationwide. The Chicago Transit Authority is projecting that they will be more than $25 million over budget by year's end because of the high cost of fuel. Shipping prices are also on the rise causing a price increase on many consumer goods, including food.

Airlines are facing a similar fate. The increase in the spread between the cost of crude oil and the price airlines pay for refined jet fuel is at its widest gap ever. Just yesterday, United Airlines announced it lost nearly $540 million in the first quarter of this year due to soaring fuel costs - the cost of which more than offset its record profits.

Durbin is the Chairman of the Financial Services and General Government Subcommittee of the Senate Appropriations Committee which has oversight authority over the FTC. Durbin plans to address the issue of fuel prices at an upcoming hearing. The FTC is responsible for investigating consumer protection and competition issues in broad sectors of the economy.

A copy of the letter can be found below.

April 23, 2008

The Honorable William E. Kovacic
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairman Kovacic:

I am writing to urge you to investigate two current trends in the oil market which are having devastating effects on consumers, commuters and air travelers.

First, we have recently experienced a price reversal of diesel fuel versus retail gasoline. Historically, gasoline typically has been more expensive than diesel fuel. The Energy Information Administration reported this week that the national average price of diesel fuel surged to an all-time high of $4.14 per gallon. Retail gasoline has risen to $3.51 per gallon. The growing price gap has never been wider.

The high price of diesel fuel is being felt throughout the economy, particularly as it affects the price of food. Increased shipping costs are contributing to higher prices on supermarket shelves.

High diesel prices are also hurting public transportation agencies throughout the country. In Chicago, the Chicago Transit Administration is already $3.2 million over budget for fuel costs this year. If prices continue rising at the current rate, fuel expenses could exceed CTA's budget by over $25.0 million.

Second, we are seeing a similar trend in the spike of jet fuel costs across the country. The aviation industry has seen wide shifts in the difference between crude oil and jet fuel prices, commonly known as the "crack spread." This difference has historically averaged about $5 per barrel, but now has climbed to $40 dollars per barrel. This rising fuel costs have caused some airlines to shutdown, and others to reduce flights and increase the costs passed on to air travelers. This growing shift in the crack spread does not seem easily explained by historic market forces and deserves the immediate attention of the FTC.

Higher diesel and jet fuel prices are affecting millions of American consumers and businesses. When the market experiences unexplained spikes in energy prices, the American public deserves strong oversight and investigation from the FTC. I urge the FTC to undertake a comprehensive investigation of oil and gas markets to gain a better understanding of the current price spikes and widening gaps in diesel and jet fuels prices.

Thank you for your attention to these matters. I stand ready to work with you to ensure that consumers are provided the answers and protections they need as rising energy prices begin to take their toll.

Sincerely,
Richard J. Durbin
U.S. Senator

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